Realty puts up a brave front despite downturn

Mumbai: Bhav gira kya (Has the price fallen)?” the prospective buyer asked. “Bhav chada hi nahin girne ke liye (It needs to rise before it can fall),” came the stoic response from across the counter from the Housing Development and Infrastructure Ltd, or HDIL, representative.

That exchange more or less sums up the current dynamic between discount-seeking buyers and reduction-resistant sellers in India’s real estate market, a chasm that was apparent at Property 2008, the 13th real estate and housing finance exhibition, a four-day event held last fortnight at the Bandra-Kurla complex in Mumbai.

A dozen signboards outside the site of the expo screamed, “Take the right decision. Buy now”, but buyers seemed indifferent to that message, even though they flocked to the exhibition in droves on Saturday.

Even as analysts caution that the days to come will be critical for developers as their inventory of unsold houses increases, real estate firms put on their bravest faces at the exhibition and said they wouldn’t consider reducing prices.

Everyone has got it wrong, they insist. “Make up your mind, this is the right time. The economic cycle is maturing and, by January next year, apartment prices will go up,” said Vinod Manwani, marketing head at the Nahar group, which is developing more than 100 acres in the heart of Mumbai, near Powai lake. Analysts say real estate firms aren’t helping themselves with this attitude.

“The current slowdown in demand for realty, coupled with declining internal accruals and reduced funding options, exposes them (real estate firms) to the downside of this aggressive strategy; there are large amounts of debt already on their balance sheets and, (with) external funds increasingly hard to come by, we foresee delays on their many ongoing and planned real estate projects, thereby leading to the possibility of sale of projects or even enterprises,” said Akash Deep Jyoti, head of corporate and government ratings at Crisil Ltd, a Standard and Poor’s company.

A report in Monday’s The Economic Times said banks and finance companies have begun pushing developers to sell cheap. To make matters worse, many companies have borrowed from outside the banking system at much higher rates. The best way out is for them to sell assets and offload completed projects, said Jyoti.

Builders also need to get realistic on pricing, as a significant correction is yet to happen, added Jyoti.

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